About one third of the state's dairy farmers supply Lion and they will see the increase in their milk cheque from the start of the new financial year, raising the base price to about 52.5 cents per litre.

The Dairy Farmers Milk Cooperative supplies 600 million litres of milk to Lion every year, and chair Duncan McInnes says the raise will help smaller farmers.

"We're actually looking after some of the smaller farmers a little bit more, so we put a bit more money into there to help those farmers out... so their productivity... would increase."

Caboolture dairy farmer Darren Crouch supplies 800,000 litres to Lion each year, and says his new return will be about 53 cents a litre.

But he wants at least two cents more to stay viable, particularly as the dry weather begins to decrease his cows' production.

"The heat now and lack of rain has turned the feed off and they're (the cows) starting to drop now in their milk production."

The president of the Queensland Dairyfarmers Organisation says a recent survey shows farmers want at least another 14 cents per litre to help offset drought issues and rising feed costs.

Brian Tessmann says dry conditions are reducing milk supply by up to 20 per cent, and processors need to be more supportive.

"Processors need to recognise the cost of producing milk in Queensland with the drought... and reflect that in the farmgate price, otherwise the milk production is going to slip away."